Public Bill Committee

[Mr. Jim Hood in the Chair]

(Except clauses 7, 8, 9, 11, 14, 16, 20 and 92) - Schedule 27

Remittance basis

Question (thisday) again proposed, That the schedule be the Twenty-seventh schedule to the Bill.

Mark Hoban: I welcome you back to the chair for this afternoons sitting, Mr. Hood.
I was talking about the Poles referred to by my hon. Friend the Member for Hammersmith and Fulham in the debate last year on the residence and domicile rules. I was pointing out to the Minister that there was apparently a degree of confusion about what the limit would be in what is introduced by paragraph 3 of the schedule. The explanatory notes state:
Paragraph 3 amends section 809D(1)...which provides that an individual unremitted foreign income and gains of less than £2,000 in a tax year does not need to file a self-assessment tax return
Paragraph 3 (3)(1A) of the schedule states that
the individual is not domiciled in the United Kingdom in that year and conditions A to F in section 828B are met.
In clause 52, condition B in proposed new section 828B refers to the matter of £10,000. There is a mismatch somewhere between the explanatory notes and the Bill as to what the cut-off level would be, so I should be grateful for some clarification. I shall have a little more to say about the £10,000 when we come to the next clause.
The other issue that is resolved, in part, in the schedule, is that of the trailing spouse. That was debated last year. The Government helpfully made a positive move by introducing a de minimis limit of UK source income of £100the hon. Member for Taunton has tabled an amendment to clause 52 about that. My only concern about the issue is that the limit may be insufficiently generous, because it would give rise to taxable income of £20. Do we want a trailing spouse to go through that process simply for £20-worth of tax? Is there not a higher, more pragmatic, limit? When we debated the issue last year the Ministers predecessor, the right hon. Member for Liverpool, Wavertree (Jane Kennedy) was very much against increasing limits. Is the Treasury much more interested in increasing limits this year? The change from £2,000 to £10,000 is one increase. Perhaps the Government should think more carefully about imposing too high a burden in respect of a relatively small amount.
The other issue that had a great deal of debate last year, both in the run-up to the Committee stage of the Finance Bill and the Bill itself, was remittances of personal property. This year the exemption has been extended so that it applies regardless of the source of income used to purchase a property. That is a welcome move by the Government, which takes account of some of the criticism made last year about the unworkabilityif that is a word in the dictionaryof the reforms and has taken things further. However, one of the comments that has been made is that the exemption could have gone a little bit further than the Government have conceded so far.
The exemption does not apply when the assets cease to be personal property. That is entirely reasonable when the personal property has been sold, and I can understand that. There is concern that the exemption should be extended to include circumstances when the property has been lost or stolen. That would be a welcome relaxation of the rules.
We are grateful that the Government have made some progress in responding to the concerns we raised last year, but I wonder if the Minister could clarify the three issues that I have raised: the interaction between the £2,000 and the £10,000 limits; whether there could be a more generous amount for the so-called trailing spouse provision; and whether the exemption for personal property could be extended to include property that is either lost or stolen.

John Howell: I shall echo a couple of the points made by my hon. Friend. I am sure that the Minister is aware of the comments made by the Institute of Chartered Accountants on this matter. Although it has welcomed much of what is being proposed, it points out that the consultative committee established for last years Finance Bill needs to continue, to ensure that the changes come through. I would like to know what commitment the Minister will give about that.
I am not sure whether this is appropriate for clause 51 or for clause 52, but there is a point that needs clarificationit probably relates to both clauses: the interaction of this legislation with settlements legislation. It would be nice to know whether that issue has been addressed and whether there should be some clarification.

Stephen Timms: I too welcome you back, Mr. Hood, after our lunch break.
I am glad that the hon. Member for Fareham (Mr. Hoban) was able to welcome the changes in the schedule. Perhaps it was a slightly grudging welcome. Nevertheless, it was a welcome and I am glad about that.
Our aim in introducing major changes to the remittance basis last year was to maintain our international competitiveness and to increase the fairness of the tax system. Of course, the UK needs to continue to be attractive to people overseas who have the skills we need for our own economy, but it is also absolutely right that those who have chosen to live and work in the UK should make a fair contribution through the tax system to support public services. That is the balance that the new arrangements were designed to deliver.
However, the Government are certainly prepared to listen to legitimate concerns that taxpayers from abroad and their advisers have raised with us, so my predecessor, my right hon. Friend the Member for Liverpool, Wavertree, who was dealing with the Finance Bill a year ago, gave a commitment that officials from the Treasury and Her Majestys Revenue and Customs would meet interested parties to review the rules, to ensure that they operated as intended and imposed no unnecessary administrative obligations on potential users.
Since the autumn, officials from the Treasury and HMRC have talked with a wide range of representatives of external bodies, as the hon. Member for Henley has mentionedI have met a number of them as well. They have identified issues that they felt should be addressed so that the new regime can be implemented as smoothly and effectively as possible. We have also taken the opportunity to make one or two other small adjustments.
The first change introduced by the schedule relates to gift aid tax relief as it applies to individuals who use the remittance basis. It was always the intention that the annual charge introduced by the remittance rules should be treated as a payment of tax for the purposes of gift aid and available to frank payments to charities. Due to a drafting error, the legislation does not deliver that result, so the amendments made by paragraphs 2 and 5 of the schedule ensure that the rules for gift aid operate as intended.
In the majority of cases, if somebody wishes to be taxed under the remittance basis they are required to make a formal claim to do so through the self-assessment system. An exception is when someones unremitted foreign income and gains are less than £2,000 in any tax year, when it is assumed that they will have chosen the remittance basis without any claim being made the hon. Member for Fareham asked a question about the £2,000 and I will come to that in a moment. A case has been made that the legislation is not sufficiently clear on that point, so paragraph 3 of the schedule seeks to put beyond doubt the fact that a claim will not be required in those circumstances. Its effect will be that people in that position will be taxed on the remittance basis, but they will preserve their right to file a tax return and to be taxed under the arising basis if they wish to do so.
The figure of £2,000 is a general de minimis limit for those who use the remittance basis. The new £10,000 limit, which is introduced in the next clause, is a new tax exemption that applies to individuals from overseas, such as migrant workers who have a job in the UK and also have overseas employment income in the same year. The exemption would simply remove the obligation on people in that position to file a self-assessment return. It is a more generous arrangement for that group of people, and it applies whether or not the individual chooses to use the remittance basis; it does not affect whether they are eligible to pay tax on the remittance basis.

Mark Hoban: Will the Minister clarify that point? I am a little puzzled by how the provision will work? If there is a £10,000 exemption for employment income but a £2,000 exemption for other income, how will the circumstances in which each one works be made clear to people who may be covered by the remittance basis?

Stephen Timms: As I said, the £2,000 is a general, de minimis limit for anyone. The £10,000 figure, which will be introduced in the next clause, applies specifically to migrant workers, who frequently will have had some employment in the same year in another country, and will have gained an income. They will have a choice about which arrangement to apply to their circumstances.
Paragraph 4 of the schedule removes the obligation to file a self-assessment return when an individual has total UK income or gains of no more than £100, which has been taxed in the UK, provided they make no remittances to the UK in that tax year. At one point, I thought that the hon. Member for Fareham was referring to trading spouses, but the appropriate term is trailing spouses. HMRC was told that trailing spouses typically have a bank account in the UK that earns only a small amount of income, and £100 covers such cases. The measure has been widely welcomed as a positive move.
Paragraph 9 relates to the rules applying to assets brought into the UK. As the rules stand, someone who has chosen to use the remittance basis will be subject to UK tax if they use their foreign income and gains to purchase property and assets that they bring into the UK. There are some exceptions to that general rulefor example, when the assets in question are imported temporarily, or are worth less than £1,000.
In broad terms, those exemptions are not available when the items are purchased using overseas employment income, so the exemptions may be difficult to operate in practice and might give rise to inadvertent non-compliance. Following representations, the Government decided that the rules on exempt assets should be extended with effect from the start of the 2008-09 tax year.
The hon. Member for Fareham asked why the exemptions were not being extended to assets that are lost or destroyed. I suggest that introducing such an exemption could open up significant opportunities for abuse. We must remain vigilant, and although we have been able to take on board a number of the suggestions made to us, that one could give rise to difficulties.
Paragraphs 12 and 13 clarify the interaction between the new remittance regime and the tax rules that apply to overseas trusts. The remittance regime includes transitional provisions that prevent certain income arising before 6 April 2008 from being taxed as a remittance if it is brought to the UK on or after that date. The point has been made that those provisions do not work as intended, so we are amending them to ensure that they do.
The hon. Member for Fareham asked whether the problem he described with settlements legislation has been solvedI am sorry, it was the hon. Member for Henley who asked that. I think that paragraphs 13 and 14 of the schedule cover that point, and people we have talked to have not only welcomed the change, but told us they think it solves the problem.
There follow some provisions that remove ambiguity in the remittance basis regime and ensure that they are not targeted by those seeking to sidestep the rules. The hon. Member for Henley, while welcoming the progress we have made as a result of the discussions, asked whether we were going to keep the consultative committee going. I can reassure him that we have agreed to do that. I agree that it has been a useful forum, and one whose value will continue for a period yet.
Taking the changes introduced by the schedule together makes the remittance basis more straightforward to operate in practice. I again express my thanks for the constructive approach the interested parties and outside organisations have taken in their consultations with officials from the Treasury and HMRC, as it has allowed us to make these worthwhile improvements to the remittance basis.

Question put and agreed to.

Schedule 27 accordingly agreed to.

Clause 52

Exemption for certain non-domiciled persons

Jeremy Browne: I beg to move amendment 177, in clause 52, page 24, line 13, leave out £100 and insert £500.
You will recall, Mr. Hood, that we had an extremely lengthy debate on all these matters a year ago, and that I had the opportunity to raise every issue I could conceivably think ofand many that I had not previously thought aboutwith regard to the topic. I do not intend to go over all that ground again, especially as it has been touched on in our discussions on schedule 27, but I have tabled this specific amendment. Yet again, I cannot claim its original authorship, because representations were made to me by the Chartered Institute of Taxations Low Incomes Tax Reform Group on that specific point, so it seemed reasonable to raise the issue and have a short discussion on it.
You will recall, Mr. Hood, that a year ago, we touched on the fact that non-doms are always portrayed in the media as extremely wealthy, but of course there are some who are not wealthy. Just before we broke for lunch, the point was made that fruit pickers from Poland, for example, or people doing jobs that pay only the minimum wage or a small amount above it would nevertheless be classified as non-doms. The amendment concerns the tax they would be eligible to pay on interest on money in their bank accounts. Because of sterlings decline against the euro, people who live elsewhere in Europe, or who are paid in euros, might be able to accumulate even more money than normal. Anyone working hard and applying themselves, even if earning a relatively small amount of money, could build up a reasonable balance without it being regarded as large by any normal persons standards, and they would be eligible to pay interest on that balance. The point was well made by the hon. Member for Fareham that that might be seen as unreasonable, although that is a subjective view.
The other point that the hon. Gentleman made was about practicalities: for someone eligible to pay £20 of tax on a balance of £100, in terms of additional interest, it seems to be quite an administrative burden to recoup a rather small amount of money. The amendment therefore proposes that the clause should specify £500 for interest payments, rather than £100, which would give people just a little more of a cushion, with regard both to practicality and to giving people an opportunity to save a small but reasonable amount of money. That would be more workable and reasonable.

Mark Field: I wish to speak briefly to oppose the amendment. To raise £100 a year in a standard, current or gold service account seems trivial but, in the low interest-rate economy in which we now live, it would need an ongoing balance of around £20,000. It is in part a function of the low interest-rate economywhich will be with us for at least the tenure of this Finance Actthat that seems a sensible de minimis level. I understand the rightful concern that we do not want anything too pettifogging, with too many different rules. In this context, the difference between a minimum of £100 and one of £500 might seem trivial, but it would require a six-figure sum in a current account to raise £500 a year, as interest rates tend to be below 0.5 per cent., even for the most generous basic savers accounts.
The hon. Member for Taunton is absolutely right that we should encourage those non-domiciles who are not well off. In my own central London constituency, there are significant numbers of peopleperhaps spouses, ex-spouses or relatives of wealthy investment bankerswho are non-domiciled but are not as well off as the general image suggests. It is fair that they should have a reasonable day-to-day balance of a few months living expenses under their beltsperhaps as much £10,000 or £15,000 a yearwell within the constraints that the Government and Treasury have in mind. If there were significant increases in interest rates in the foregoing 12 months I hope that the Treasury would return to this and raise that minimum threshold. At this juncture, £100 is a relatively sensible one to have in place.

Stephen Timms: I am with the hon. Member for Cities of London and Westminster on this one in the debate we have just heard. The hon. Member for Taunton is absolutely right that a lot of foreign workers on low incomes come to the UK and might well fall within the remittance regimepeople working in agriculture or constructionand it was never our intention to bring low-paid workers into self-assessment in that way, still less so when there is no tax involved. The clause introduces an income tax exemption on overseas income, which effectively removes the obligation to file a self-assessment return from anyone who has foreign employment income of less than £10,000 in any tax year, as we were discussing a moment ago.
People might also have small amounts of income from bank accounts or other investments overseas in addition to their foreign employment income. That would again trigger an obligation to file a self-assessment return and, again, that was not the intention. The change here is that people with overseas bank interest of less than £100 in any tax year will still be able to take advantage of the tax exemption. I should clarify the fact that the clause requires that the foreign income must be subject to a foreign tax. That does not mean that the person must actually have paid tax on the income in a country other than the UK. It could well be that the income in question is liable to a tax rate of 0 per cent. or could be covered by overseas personal allowances, in which case no tax would be payable on it but it would still count as subject to a foreign tax in this clause.
I think that the hon. Member for Cities of London and Westminster is right: an investment income of £100 in the current environment does equate to a significant capital saving. That is set at the right level in the current environment to ensure that the people who are the target of this measure will not be brought into self-assessment. An investment income of £500 would mean a significant capital sum. The clause deals with individuals on low incomes who come to work in the UK in the sort of situations that we have discussed. I am not aware of any evidence of a need to increase the threshold, and I am confident that nobody will be prevented from taking advantage of the tax exemption and the administrative relaxations that it delivers. I accept that we should keep the matter under review, as circumstances might change and the threshold might need to be raised, but the £100 level is right for now.

Jeremy Browne: I am happy to have had the opportunity to make my point and to have heard the entirely valid arguments made by the two other contributors during our brief discussion. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mark Hoban: The principle of the clausethe introduction of a £10,000 exemptionwas discussed at length last year. There were various proposals at that time, one of which was tabled by the hon. Member for Taunton to change the exemption from £2,000 to the value of the personal allowance. The then Financial Secretary said that that would be far too expensive and that we should not do it, but the Government have clearly had a change of heart. Concerns were also raised a year ago about the administrative burden that such a low level would place on Her Majestys Revenues and Customs, but again we were assured that that was not a problem. However, here we are a year later, and there has been a sea change in the Treasurys approach, with the introduction of a £10,000 exemption for earned income. To make sure that the Minister will not claim that I grudgingly welcome the measure, I will say that I wholeheartedly welcome it. It is a very sensible measure and one that the Government, had they listened to the representations of people such as the Low Incomes Tax Reform Group last year, would have included in the previous Finance Bill.
The Minister made a comment earlier about interest income being subject to tax. Will that also apply to employment income? The LITRG raised the issue in its representation this year, which takes us back to 828B(2)(b) which states that
all of that amount is subject to a foreign tax.
The Ministers earlier reassurance in response to the amendment tabled by the hon. Member for Taunton that personal allowances and zero-rate bands will be taken into account is helpful, and applies to employment income as well as interest income. I would be grateful if the Minister could place that on record.
Is the issue raised by the LITRG something that the Government will determine on a territory-by-territory basis where income for a territory is subject to tax, or will there be a blanket exemption? If it is to be determined on a territorial basis, it would be helpful to have a list of jurisdictions where the Government believe that up to £10,000 of income has been subject to tax. That list of countries will need to be made known to migrant workers who are here on a temporary basis, as they need to be told what is and is not appropriate. A blanket exemption, however, would be administratively easier for migrant workers, as it would avoid having to communicate to them a list of exempt companies.
I would therefore like the Minister to clarify two points. First, will he clarify what is involved in being subject to foreign tax, and will he confirm that his explanation on the £100 investment income also applies to employment income? Secondly, is it a blanket exemption, or will it be applied on a territory-by-territory basis? Perhaps he could just round that off by saying why he now thinks that £10,000 is appropriate, whereas last year it was seen as being a necessary cost to the taxpayer.

Jeremy Browne: I wish to speak briefly to the clause. I am reliably informedI admit that I did not conduct this research in the Derby Gate Library myselfthat in the drafting last year, schedule 7 ran to 55 pages, or 22,989 words, and there were 160 pages of explanatory notes and more than 100 Government amendments wrestling with this difficult area to try to get a grip on it and make it workable in practice. Even then, the Institute of Chartered Accountants in England and Wales described the Governments efforts as
incomprehensible, unworkable and likely to be undermined by poor compliance.
On that basis, I am extremely grateful that the Government have listened to representations made by members of this Committee and others who do their best to ensure that the Governments policies work in practice. I am extremely flattered that the general direction that the Liberal Democrats have been taking in respect of tax thresholds is being adopted incrementally by the Government, and that the intellectual argument is being won. It is important that, wherever possible, people on low incomes are given the most incentive to work and contribute to our economy. I am sympathetic to what the Government have finally managed to achieve and interested to know whether the Minister will take this consultative, wide-ranging approach in future and take on board any of the other suggestions made by Opposition parties.

Stephen Timms: My right hon. Friend the Member for Liverpool, Wavertree, who was then the Financial Secretary, agreed that there should be a discussion with the Low Incomes Tax Reform Group and others, and that discussion has proved to be fruitful. Of course, we always listen to suggestions made by hon. Members in this Committee and elsewhere. I shall take the remarks that have been made as a warm welcome for the changes in the clause.
This is a useful reminder that the remittance basis of taxation does not affect only wealthy people, as we have discussed. The LITRG and TaxAid pointed out that, as a result of the changes made last year to the remittance basis rules, many people on low incomes could be required to file a self-assessment return. The clause removes that obligation from any individual whose foreign income solely comprises overseas employment income of less than £10,000 and overseas bank interest of less than £100 in any tax year, all of which is subject to tax in the country where the income was earned.
To respond to the specific points raised by the hon. Member for Fareham, yes, the observations that I made in the context of investment income apply equally to employment income. The exemption is a blanket exemption rather than a territory-by-territory exemption.
I gladly express gratitude to all those who have made representations on the subject, and I hope that the Committee will be content to add the clause to the Bill.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.

Schedule 28

Taxable benefits: cars

Question proposed, That the schedule be the Twenty-eighth schedule to the Bill.

David Gauke: It is a great pleasure to serve under your chairmanship, Mr. Hood, I believe for the first time in this Bill Committee. I assume that the Exchequer Secretary will be dealing with this schedule. May I formally welcome her back to the Treasury? I know that this is not the first time she has been a Treasury Minister. Perhaps she is following the example of the Financial Secretary as a serial Treasury Minister. I do not know whether she will reach his total number of spells in the TreasuryI suspect she will not do so in the immediate future.
Schedule 28 deals with provisions regarding taxable benefits that arise from cars being made available to employees by reason of their employment. I have a couple of queries that I would like to raise with the Exchequer Secretary. The first matter is the abolition of the current £80,000 list price cap, which will lead to higher tax charges for individuals using more expensive cars. The Institute of Chartered Accountants in England and Wales asked whether that proposal will have an impact on the UK car industry, because the UK car industry produces a number of cars that would exceed the £80,000 list price cap. I would be grateful if the Exchequer Secretary said whether any assessment has been made of that impact.
The second issue is directly relevant to provisions regarding the taxable benefits that arise from cars being made available to employees by reason of their employment. I will mention briefly a slightly specialist point, and, to be fair to the Exchequer Secretary, it is a matter that she may find easier to respond to in writing. In April, through correspondence, I raised with her predecessor the issue of car dealership employees who are taxed on their use of demonstrator cars. The problem relates to those employees working for car dealerships who use demonstrator cars for their own private use. It has long been accepted that it would be inappropriate to tax that benefit in kind in exactly the same way as company cars are usually taxed. It is likely that the employee will use more than one car or that they have no choice over which car to drive. The car that the employee drives is likely to be disproportionately expensive compared with their salary.
As a consequence, a system has developed whereby HMRC has looked at a range of models and averaged a value to calculate a figure for the relevant benefit in kind. A new system was introduced in April that still works on the basis of averaging the value, but it is done on narrower bands. I have received representations from car dealerships and manufacturers because the consequence of that is likely to be that more car dealership employees pay tax. In addition, the measure is likely to increase the administrative burden on car dealerships. As I said, I have raised that point previously in correspondence, but given that schedule 28 deals specifically with taxable benefits and cars, I have taken the opportunity to raise it again.

John Howell: I wish to make a couple of points. My hon. Friend has asked about the impact of the provision and research on the car industry, but will the Minister comment on the difference in tax yield between the proposal under discussion and increasing the amount from £80,000 to, say, £100,000?

Kitty Ussher: It is a pleasure to serve once again under your chairmanship, Mr. Hood. As it is, or it is also a pleasureeven if I cannot speak

Peter Bone: Overwhelmed.

Kitty Ussher: Overwhelmed, indeed, by the opportunity and privilege of debating with the hon. Gentleman again today.
The points that have been made are valid. The schedule does three things: shifts down the CO2 emission threshold for the main company car tax band by 5g CO2 per km; abolishes the cap on company car list prices for the purposes of CCT; andI think this is uncontroversialsimplifies the legislative means by which the appropriate percentage for electric cars in CCT is set.
On the point made by the hon. Member for South-West Hertfordshire, we have, of course, considered the impact on the industry. The impact, if there is any at all, is negligible, for the simple reason that only around 1,700 company cars retail at more than £80,000. The price range may be extremely wide. I think the figure of £300,000 was mentioned. People who purchase that type of car should easily be able to cope with what we propose. There is no policy reason for a cap. On the point made by the hon. Member for Henley, it therefore follows that it would not make any difference if the cap were raised to £100,000.

Peter Bone: I am grateful for the Ministers explanation, but given what she has just said, why are the proposals being introduced at different times?

Kitty Ussher: We like to give certainty to the industry, and are simply setting out what we propose to do in the appropriate years ahead. Some of those proposals have been pre-announced, fulfilling different commitments.
Abolishing the £80,000 cap will, after three years, yield about £5 million, while raising the cap to £100,000 would probably not yield anything quantifiable. I hope that that goes further towards answering the question asked by the hon. Member for Henley.
The hon. Member for South-West Hertfordshire raised an issue that, as I was aware, he raised with my predecessor in correspondence: car dealerships that might give employees a different car to drive every couple of days, or every week. As he says, while in some firms an employee might be given those different cars because they are what they would like to drive, in many other firms employees do not have a choice. He is right that in the past, just to make it simpler for the employer and the garage, we allowed average list prices. What we wish to address is the fact that those prices were negotiated with HMRC on a piecemeal basis, garage by garage, often with an individual garage in a chain of garages. That sometimes led to an arbitrariness that perhaps was not conducive to good policy making, and we are simply formalising the process by means of a national system.
It might help the hon. Gentleman to know that the effect of the change is cost neutral to us, and so while there might be differences for individualsand they are right to raise those differencesthis is not a revenue-raising measure and there will be both winners and losers. I am sure he agrees that it is better to have a proper system, rather than to deal with the issue on an arbitrary, ad hoc basis.

David Gauke: I am grateful to the Minister for responding this afternoon on that point. I note her comment that the measure is cost neutral for HMRC, but what assessment has been made of the additional administrative burden for car dealerships? What consultation was there with car dealerships and the car manufacturing industry as a whole, and what was the response?

Kitty Ussher: I think that I am able to reassure the hon. Gentleman on those points. We have consulted extensively with industry bodiesfor example, the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federationon the change. The feeling that we are getting back is that the change will lead to reduced administrative burdens, because of the certainty that it provides. Individual employers do not have to use an averaging process if they do not want to; they can continue with the mainstream system if they prefer that. However, the purpose of the measure is to reduce compliance costs and have a far simpler method.

David Gauke: In the correspondence that I have seen, both RMIF and SMMT have expressed concerns about the proposal. That correspondence dates back a couple of months or so, and those bodies position might have changed, but what I have seen suggests concerns about the proposals rather than a general welcoming of them.

Kitty Ussher: The advice I have been given is that the measure should lead to reduced administrative burdens, and that that is understood. We intend there to be a simplification measure. We are making the change because people have complained that the previous system of individual car averaging arrangements with individual employers and garages was unfair, and led to inconsistencies across the country. Perhaps that is the nub of the problem. If there were inconsistencies there would obviously be winners and losers as a result.
I simply want to reassure the Committee that this is not an attempt to ratchet in more funds to the Exchequer; it is simply better policy making. If in ironing out there are inconsistencies and some individual employers feel hard done by, I can understand that. But this is a better way forward. As I said, they have the option of not going down the averaging route if they prefer. I hope, having explained that, that the schedule will be accepted by the Committee.

Question put and agreed to.

Schedule 28 accordingly agreed to.

Clause 54

Taxable benefit of cars: price of automatic car for disabled employee

Jimmy Hood: We now come to amendment 72.

David Gauke: With your permission, Mr. Hood, as the amendment is technical in nature, I should like to include in the debate on it my remarks on clause stand part.

Jimmy Hood: Does the hon. Gentleman mean that he does not want to move his amendment?

David Gauke: No, I want to move the amendment, but it may be helpful if I also include my general remarks on clause 54, if that is acceptable. If not, I will deal with the amendment separately.

Jimmy Hood: I would prefer you to deal with the amendment separately. Then we can have the stand part debate.

David Gauke: Thank you, Mr. Hood, for your guidance.
I beg to move amendment 72, in clause 54, page 26, line 6, leave out
at or about the same time
and insert
in the same registration period.
The amendment seeks to amend one of the elements of the clause. The clause provides that for disabled drivers of automatic cars who hold a disabled persons badge, the list or notional price of an equivalent manual car will be used instead of the list or notional price of the automatic car that they actually drive when computing the car benefit charge if it produces a lower taxable benefit. This removes the disadvantage that some disabled company car drivers might face when they must drive an automatic car because of their disability.
Subsection (3) defines an equivalent manual car as a car that
is first registered at or about the same time as the automatic car.
The phrase at or about the same time seems a bit vague. The amendment would replace it with the phrase in the same registration period. It is simply an attempt to provide additional clarity. There may be good reasons for the current wording, but the amendment was suggested by CIOT and is much more precise.

Kitty Ussher: I urge the Committee to resist the amendment. As the hon. Gentleman suspected, there is an extremely good reason for the current wording, which states that the relevant car price should be that for an equivalent manual car that is registered at or about the same time as the automatic car. This definition has been used in legislation for seven years and HMRC has received no representations that it is difficult to use in practice. However, if the Opposition amendment were accepted, things would immediately become far more complicated. If a reference period of six months were used, it would not be at all clear what the relevant price of a manual car would be for comparison purposes. Car list prices can change within registration periods, often quite dramatically, so the suggested wording would not always lead to a single figure. Indeed, it might encourage all sorts of negotiation about what the correct figure should be. We think that that would lead to unnecessary complication.

Mark Field: Without wishing to paraphrase the thoughts of my hon. Friend the Member for South- West Hertfordshire on the matter, surely the registration period is an entirely certain period of timesix months. What does she understand the phrase at or about the same time to encompass, either from her own experience, or from any non-representations that she has had over the past seven years from interested parties?

Kitty Ussher: It is exactly what it says on the tin. The fact that nobody has complained about it in the past seven years means that people understand what at or about the same time is. It is a price that is available at or around the same time. I suppose the word around is used because at that precise moment there may not exactly, at that infinitesimal moment in time, be a precise comparison and so it is a reasonable time period to use. If the amendment were accepted, it could lead to some disabled drivers paying more in income tax, and that is certainly not our intention. We want to give disabled company car drivers certainty about how they will be supported through the tax system.

Mark Hoban: If it is open to abuse, disabled drivers would find the best comparison price to reduce their tax liability; they would not put in a price that would actually increase their tax liability.

Kitty Ussher: Well, that is not at all clear from the wording that his party is proposing. There could be all sorts of different prices out there in a six-month period. There could be a price one day that is very different from a price 10 or 15 days later. There is the additional complication of burden of proof, either on one side or another, whereas the current system is easy to understand and easy to administer, so I do not see the point in changing it.

David Gauke: Does the Minister think it is possible that a registration within the same registration period would not be at or around the same time? It seems to me that our amendment actually narrows the requirement, rather than widens it. I am not sure that her case is quite as strong as she makes out.

Kitty Ussher: I am sorry if I am not making the strength of my case clear, but perhaps I will try again. The list prices of cars can change quite dramatically during a registration period, which is currently six months. It is not clear, therefore, what the relevant, appropriate price of an equivalent manual car would be. However, if the legislation says at or around the same time, then clearly, as the last seven years experience has shown, it is the price available at or around the same time that is taken, as opposed to any price over a six month-period, which could vary quite widely.
Mr. Gaukerose

Kitty Ussher: If the hon. Gentleman wants to try again, I am happy to take him up on it.

David Gauke: Let me make it clear. I have no doubt of the strength of the way the Minister is putting her case, I just think that that strength is unwarranted. Could she be clear? Does at or around the same time mean essentially the nearest time to the date of registration of the automatic car? If that is the casethe wording is not as clear as it might bethen she does have a stronger case.

Kitty Ussher: That is the case, which is why my argument is stronger than that which the hon. Gentleman is proposing.

David Gauke: Finally, I may be persuaded by the Minister. With a certain amount of persistence, she may well have articulated her case, in which case I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

David Gauke: Mr. Hood, you anticipated that I have one or two remarks to make on the clause.
We have already touched on the essential purpose of the clause. However, I just want to make one other point. The application of the clause is based upon an employee holding a disabled persons badge. The LITRG, at the prompting of the charity Mobilise, has questioned whether the blue badge scheme is sufficiently wide to include everyone who needs to use an automatic vehicle. For example, it has stated that
single amputees do not necessarily qualify for a blue badge, but do need to drive an automatic.
Consequently it goes on to say:
It would be interesting to know why a definition linked to the disabled badge scheme
has been used in the clause.
The LITRG also noted another issue that is worth highlighting. The issue of disabled badge holders arose earlier, of course, in our considerations, in the debate that the Exchequer Secretary had with my hon. Friend the Member for Fareham about the definition used in paragraph 22 of schedule 11. I shall quote from that debate, in which the Exchequer Secretary responded to a question from my hon. Friend about why that particular provision could not be simplified to include disabled badge holders:
The hon. Gentleman then asked specifically why in paragraph 22 we do not simply use the qualification criterion of a person holding a disabled badge. The answer quite simply is that the power to award a badge is devolved to local authorities and we wanted to ensure that we had a comprehensible and tighter set of criteria, so that the system and the resources are properly targeted on those people who need our support.[Official Report, Finance Public Bill Committee, 9 June 2009; c. 234.]
I would be grateful to the Exchequer Secretary if she could explain why the disabled badge qualification was inappropriate for paragraph 22 of schedule 11 but is appropriate for clause 54.
For the clause to work effectively, it will be necessary to publicise the new provisions contained within it. I should say first that we welcome the intention behind the clause; the clause is seeking to do something that is very worthwhile and just. However, as I say, if the clause is to work effectively it will be necessary to publicise the new provisions, so that employers and employees know what information to provide to HMRC to obtain the correct 2009 tax coding restriction. I would be grateful if the Exchequer Secretary could say what steps were being taken to publicise the provisions in the clause.

Mark Field: I want to make a brief contribution on a tangential issue that arises here. My hon. Friend has rightly said that it is up to local authorities to determine whether or not an individual qualifies for a blue badge. As someone who represents a central London constituency and two central London local authorities within that constituency, I would be very reluctant to see any move away from local authorities having that power. I appreciate that it may not be in any way in the Treasurys thinking at the moment, but I strongly oppose any suggestion that the mechanics of the blue badge disabled driver system should be determined at a national level.
Westminster city council is working closely on this issue with a number of neighbouring and non-Conservative local authorities, such as that in the London borough of Camden; in fact, Camden is of course now under Liberal and Conservative control. Westminster city council feels very strongly that it should continue to have autonomy in awarding such badges and that a national badge scheme would not be in the interests of disabled people. Although disabled people would like to have the opportunity of coming to central London, if they all did it would absolutely clog up the parking system in the area. I appreciate that that is a tangential point and does not necessarily represent the thrust of the comments made by my hon. Friend the Member for South-West Hertfordshire, but I wanted to put something on the record about it. It is an issue of considerable importance and a number of central London local authorities are acutely concerned that, although elements of the scheme have national resonanceobviously, in relation to tax benefitsthose should not apply to the operation of the scheme itself.

Kitty Ussher: It might help if I start by explaining exactly what the clause does, because the context for this policy change might answer some of the wider questions as well. The clause supports the Governments commitment to provide help for the disabled by changing the way in which the company car benefit charges are calculated for disabled drivers who need to drive an automatic car because of their disability.
Company car drivers holding a blue disabled persons badge are already able to use the carbon dioxide emissions figure of an equivalent manual car when calculating their company car benefit, in place of the figure for an automatic car, which is usually a higher-emitting vehicle. The logic is that, because automatic cars emit slightly higher amounts of CO2 per km than the equivalent manual car, it is unfair that people who have to have an automatic car because of a disability that they cannot control should be penalised through the taxation system. We are making the system slightly more generous for people in that category by saying that such drivers would also be able to use the list price of an equivalent manual car to work out the benefit charge instead of the list price of the automatic car that they currently drive. That is usually to their advantage, because of the price differential between two equivalent models.
The clause would simply align the methods used to determine the list price and the CO2 emissions figures. It is a logical tidying-up exercise, but it also benefits disabled company car drivers, so it should be supported. I welcome the support from the official Opposition spokesperson. Both methods of calculating benefit will now be based on an equivalent manual car, if that is more beneficial for the disabled driver. If it is not, that does not have to be so.
Just for the record, and subject to certain conditions, the cost of accessories provided for disabled drivers is also excluded from the calculation of the company car benefit charge.
The hon. Member for South-West Hertfordshire was perhaps making two arguments that pointed in different directions. He asked, first, about disabled drivers who do not hold a blue badge and whether they should also be included. The blue badge provides a clearly defined test of disability, it has worked in this area of policy in the past and there is no proposal to change it. However, it is worth stating clearly that, in exceptional cases, affected individuals in particular circumstances will be able to contact HMRC to seek guidance about whether there is any flexibility or any prior agreement that can be reached.
Having argued that the scheme should, perhaps, be more generous, the hon. Member for South-West Hertfordshire questioned whether it could be made tighter by using the definition that we debated earlier in the week in relation to capital allowances, which also applies in respect of vehicle excise duty and is tighter than the one that applies in this area of policy.

David Gauke: Perhaps I can take the Minister back a moment to her suggestion that somebody who is not eligible for the blue badge may be able to seek guidance from HMRC and may benefit from the scheme. That is welcome, but I should be grateful if she reconciled that with the wording contained in clause 54(5), which contains new section 124A of the Income Tax (Earnings and Pensions) Act 2003. It states:
This section applies...at any time in the year when the automatic car is available to the employee (E), E holds a disabled persons badge.
That flexibility does not appear to be contained in the legislation. I should be grateful if she clarified that point.

Kitty Ussher: I cannot possibly begin to describe the circumstances, because those will depend on the individuals situation. If people feel that, in their individual circumstances, it could apply to them, HMRC is saying that individuals who are affected should contact it first before applying and it will be happy to have that conversation. If I can provide further detail, I will.
I was discussing why the gateway for disabled company car drivers is different from that in other policy areas, such as capital allowances and vehicle excise duty. The policy aim has a different origin. For example, in vehicle excise duty, the disability exemption is a total exemption from paying that duty to help those who are practically unable to walk to be driven or to drive themselves, whereas in company car tax, blue badge holders are allowed to substitute only the CO2emissions, and now the list price, of an equivalent manual car when calculating the company car benefit, to give them parity with able-bodied drivers under law.
The main point is that we are taking an existing policy that works well and simply making it slightly more generous, because we think that there is a logical policy reason to do so. We are not seeking to open a debate about the definition of disability across the taxation system. The policies have different rationales, which is where the differences arise.
I take the point made by hon. Member for Cities of London and Westminster about the burden on councils. I hope that he will be reassured that we are not opening up the entire blue badge scheme, so the relevant council officials can rest easy. Question put and agreed to.

Clause 54 accordingly ordered to stand part of the Bill.

Clause 55

Exemption of benefit consisting of health-screening or medical check-up

Question proposed, That the clause stand part of the Bill.

David Gauke: The clause deals with the exemption of benefits consisting of health-screening or medical check-ups. It may help if I set out a little background to the measure.
Two statutory instruments introduced in August 2007 dealt with the taxation and reporting of health screenings and medical check-ups provided by employers to employees. Previously, employers and HMRC had persisted in treating the provision of periodic health screenings and medical check-ups for employees as exempt from tax and reporting requirements. There was no specific provision requiring such benefits to be provided universally in order to be tax and NIC exempt. However, HMRC took the view in 2007 that the practice was based on an understanding or assumption, rather than on strict legality. New regulations provided a significantly narrower exemption for periodic health screenings and medical check-ups.
The changes introduced in August 2007 required any provision of health screenings by an employer to an employee to be made available to all employees and any medical cheek-up to be either made available to all employees or made available to those identified by a health screening as needing such a check-up. Those regulations came into effect on 14 August 2007, but had a retrospective effect covering the 2007-08 tax year. Strong representations were made about that retrospection. HMRC agreed not to collect any tax for 2007-08 and, in February 2008, that was extended to 2008-09, so we had a period of confusion.
Clause 55 is a revision of the revised proposals of August 2007. After receiving further representations, HMRC announced on 10 December 2008 that it would include legislation in the Finance Bill
to exempt from tax the provision of yearly health screening and medical check ups
without the proviso that they have to be generally available on similar terms to all employees. That is essentially what is covered by the clause.
The clause is welcome up to a point. It is fair to say that the changes announced in August 2007 were somewhat botched and that there has been a lengthy period of confusion, but concerns remain that clause 55 is still somewhat restrictive. There is a restriction to one health screening or check-up per tax year, but an individual may well require more than one screening or check-up, or a check for more than one potential condition, per year. It is often impractical to ensure that an annual medical that occurs around the start or the end of the tax year is not repeated within that same year, as people can end up having two medicals in one year just by a few days. I should be grateful to know why the Government have not reverted to the position before August 2007. Why is there a restriction of one check up per year? I suspect that the answer may well be cost, but what is the cost? I am sceptical that it is very significant.
The clause will reduce the amount of red tape for employers and employees, so we welcome it as far as it goes; it is clearly an improvement on the uncertainty of the past two years or so. However, I would be grateful to know why the Government have not sought to return to the arrangement that seemed to be working perfectly adequately prior to August 2007.

John Howell: My family would be intensely surprised to hear me speak to this clause and encourage people to have more than one medical per year. New Speakers are reluctantly dragged to the Chair; I am more than reluctantly dragged to a medical. In the years in which I was a partner at Ernst & Young, an annual medical was required for insurance purposes, but my interpretation of annual was always somewhat loose. I understand that the medical profession have a term for thatwhite coat syndromewhich, in my case, I attributed to the obvious mental scarring that occurred when I shared student accommodation with too many medics.
During the course of my experience with a regime that required annual medicals, it was impossible to schedule them on a strictly annual basis. It is not a question of a couple of days; it is often impossible, with a large work force and the way in which a medical schedule is taken up and booked far in advance by a doctor, to fit a medical in within even a couple of weeks or a month of the annual date. There were many occasions when a second medical occurred within the same tax year. Also, although I never had to endure it, colleagues of mine had to return during the year, either for further check-ups as a result of their original medical, or for medicals for additional reasons. For the reasons advocated by my hon. Friend, the rules need to be further relaxed, although I assume that I will not have to be subjected to more medicals than I need.

Brian Jenkins: I will not take much time, because I know that Members want to pursue the Bill as rapidly as possible, but I want some clarification from the Minister, because I would be worried if I thought that we were taking a step back.
There are employees in this country who work in hazardous conditions, which might require the employer to work with them and their trade union to ensure that they have one medical check a year. I seek assurance from the Minister that there is no way we are going to stop or financially impede the opportunity to take that check, depending upon the type of work the employee undertakes. I would of course like all employees in any company to be treated equally, and if an employer wants to undertake an annual medical check, all their employees should be treated the same, but for individuals working in hazardous conditions, we should ensure that we will put nothing in the way of checks occurring more frequently than once a year.

Alison Seabeck: In Devonport, we have a dockyard. There are frequent reports of nuclear leaks, which are exceptional, but were a leak to happen, each employee would clearly need a full and thorough health check, which might be in addition to one they have already had, so I share my hon. Friends concerns.

Brian Jenkins: I understand totally that the employees in such areas carry dosimeters all the time, and when those meters change colour the employee must have a medical check, irrespective of when they last had one, but there are many areas in industry across the country where those conditions can arise, and I would not like the ability to have annual checks to be put back. I would like the Minister to make that totally clear.

Kitty Ussher: I will start by reassuring my hon. Friends the Members for Tamworth and for Plymouth, Devonport that the provisions we are debating are completely without prejudice to the relevant health and safety legislation, which of course require workers to undergo the necessary medical testing and treatment, in so far as their personal health is affected by conditions at work. That is the crucial difference, so I hope that that reassures them.
Responding to the points made on more frequent medical checks, it has never been our intention that medical treatment should be exempted from tax when provided by a company. That is no different to any other type of private medical treatment. An individual may go for a check-up in which a problem is identified that is then treated via the company, but we have no desire to treat that check-up as a benefit in kind. We therefore provide a generous taxation position; I do not know whether the Opposition would want to do so.
Before the regulations were introduced in 2007, the guidance, as has been mentioned, referred to periodic medical check-ups. That was based on the understanding that, when an employer provides employees with medical check-ups, they are commonly at longer intervals than once a yearperhaps reflecting the fact that the hon. Member for Henley is not alone in his aversion to check-ups. It is certainly our understanding that routine check-ups, rather than treatment, tend in practice to take place less frequently than once a year, which is absolutely fine as far as the regulations are concerned.
The regulations were introduced in 2007 because we needed to ensure there was a clear legislative basis for what was otherwise simply an understanding on the part of HMRC. We are changing them now precisely because of the representations we have received and simply because we want to get the provisions right. There were some anomalies that, to be honest, HMRC had not identified. The example that makes the point most clearly is that the 2007 regulations stated that precisely the same check-ups needed to be made available to all classes of people, and since some of the check-ups are for gender-related cancer, it immediately became apparent that it was absurd to require that the whole work force should be tested for testicular or breast cancer, regardless of gender. It soon became clear that something needed to be sorted out, so the clause aims simply to regularise that position.

David Gauke: Given that swine flu is back in the news today, one potential issue is that employers might want to instigate checks and make them available to their employees in an attempt to respond to it, particularly in the autumn when there are likely to be concerns about swine flu again. In clause 55, it appears that an additional check in the course of the year would be taxable. I understand why it is not addressed in the legislation, but would the Treasury be willing to reconsider if concerns about swine flu increased and such checks became widely available?

Kitty Ussher: We are not planning to look at this again. A company wishing to undertake swine flu checks on its entire staff would do so for both humane and business continuity reasons. It is ultimately a commercial decision for the company. There are intense efforts across Government to ensure, through the national health service, an appropriate response to any future swine flu pandemic, and that will proceed as normal, regardless of where people work.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. (Mr. Blizzard.)

Adjourned till Tuesday 16 June at half-past Ten oclock.